States Continue To Procrastinate In Indian VAT Debate

by Mary Swire, Tax-News.com, Hong Kong

29 April 2003

Indian Finance Minister Jaswant Singh is expected to announce this week that the implementation of the controversial VAT will be deferred for six to eight months, according to reports from the Indian media this week.

The government's decision to levy VAT (Value Added Tax), a form of sales tax, has been highly unpopular with the country's traders and shopkeepers, who fear that it will drive up prices and lead to business failures. Their protests culminated recently in mass demonstrations in the capital and strike action across the country.

The new tax, which is replacing the sales tax, is being implemented at state level. However, ten of the sixteen states have not yet drafted the necessary legislation in order to pass the tax into law, and it is now thought very unlikely that the new June 1 deadline for introduction of the tax will be met.

The ruling BJP party is highly reluctant to press ahead with the implantation of VAT unless there is unanimity amongst all of the states, fearing that economic chaos could result from the disparity between states which charge VAT, and those which don't.

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